Tax Raid on Retailers Warned to Fuel Inflation Heading into Christmas

Strategic Insights -

Rachel Reeves has been warned by the British Retail Consortium (BRC) that a tax raid on retailers in the budget in October would fuel inflation and drive up food prices heading into Christmas. The warning comes as the UK's inflation rate has risen to 3.6 per cent, with food inflation reaching 4.5 per cent, the highest in 15 months. The BRC's chief executive, Helen Dickinson, has stated that the planned rise in business rates for large stores and supermarkets would "add to inflation at the worst possible moment". Many retailers are already struggling with the "knock-on effects" of Reeves's decision to increase employers' national insurance by £25 billion a year from April.

Key Takeaways:

  • The BRC has warned that a tax raid on retailers in the budget would fuel inflation and drive up food prices heading into Christmas.
  • UK inflation has risen to 3.6 per cent, with food inflation reaching 4.5 per cent, the highest in 15 months.
  • The BRC's chief executive, Helen Dickinson, has stated that the planned rise in business rates for large stores and supermarkets would "add to inflation at the worst possible moment".
  • UK employers' national insurance has been increased by £25 billion a year from April, which has already led to retailers absorbing additional costs.
  • Two-thirds of retailers intend to raise prices in response to the national insurance rise, according to a BRC survey of CEOs.
  • The planned rise in business rates for large stores and supermarkets would disproportionately hit properties with a rateable value above £500,000, resulting in a £600 million hike in the tax bill faced by large retailers.
  • The BRC is calling on Rachel Reeves to rethink the plans and reduce business rates across the board for retailers.

Statistics:

  • UK inflation has risen to 3.6 per cent in the 12 months to June, above economists' expectations.
  • Food inflation has risen to 4.5 per cent, the highest in 15 months.
  • The planned rise in business rates for large stores and supermarkets would result in a £600 million hike in the tax bill faced by large retailers.
  • Two-thirds of retailers intend to raise prices in response to the national insurance rise.
  • The UK's unemployment rate has risen to 4.7 per cent, its highest in four years.
  • The government's reversal of the cuts in the winter fuel payment and the abandonment of major welfare reform measures have left a £5 billion black hole in the chancellor's fiscal headroom.

Sources:

  • British Retail Consortium
  • Office for National Statistics
  • Rachel Reeves
  • Helen Dickinson, Chief Executive of the British Retail Consortium
  • Editorial, main section, page 22